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Home prices are rising, but even the well-off are facing obstacles from tight-fisted banks

By: Richard Satran

US News & World Report’s | August 1, 2013

Having trouble getting home financing? You’re not alone. Even wealthy people are getting rejected under the tough new lending rules adopted after 2008’s housing market crash.

Moneyed enclaves are still feeling the impact of tight mortgage money. In the breezy New Hampshire lakes region where “On Golden Pond” was filmed and waterfront homes routinely sell in the $5 million to $10 million range, sales are “brisk” but loan applications are often rejected, says sales associate Jerry Love of Peabody & Smith Realty in Holderness, N.H., on the shore of Squam Lake.

“We don’t see deals sail through with the automatic approvals that we used to see,” Love says. “And we are seeing plenty of wealthy people turned down on million-dollar loans who would easily have qualified a few years back.”

The rules may get even tougher under proposals now being considered in Washington designed to cap borrowing as a percentage of income. That will be especially bad news for first-time homebuyers and people with moderate incomes who have the hardest time lining up financing. But even those with millions in assets and high credit scores are being turned down if their income is low. And in a low-rate environment, their investment income counts for less than ever on bank loan applications.

“People with a lot of resources are usually OK getting first mortgages, but they are finding they can’t refinance or get funding for a second home,” says Tyler Vernon, a loan specialist for Biltmore Capital Advisors in Princeton, N.J. “Of course it’s a nice, high-level problem to have. But it’s a real problem for retirees in places like the Northeast.”

Also, while increasingly stringent income requirements are posing the most barriers, stingy assessments are also a frequent problem for costlier deals, according to real estate agents and lenders. In part, that’s because “assessors are protecting themselves because banks have been suing them over mortgage failures that showed inflated values,” Vernon says. Costly properties can pose difficulties when assessors try to find comparable sales for estimating what mansions are worth, Love adds.

“Everything has moved to a much more rigorous underwriting environment, and every datapoint in every application is verified, checked and documentation is gone over multiple times,” says Michael Fratantoni, vice president of single-family research and policy development at the Mortgage Bankers Association.

People with money are finding ways to buy properties, but in the first go-around, they are finding surprises. “The lenders want income statements. They want to check with employers directly on people’s work record, and they want to see people who have been in jobs for awhile,” Love says. “That’s not something our wealthy buyers can always show.”

To be sure, it’s first-time buyers and people with moderate incomes who are having the most trouble getting credit, Fratantoni says. But this is a dramatically different lending environment no matter what income strata you are in. The MBA’s index on mortgage credit availability has risen slightly over the past year, but it’s nothing like it was prior to the crash. The MBA’s credit availability index is just two years old. But it calculates that home financing would have been eight times as easy in the years leading up to the housing collapse.

Still, some lending has thawed a bit. The MBA says there has been some recent easing up on loan requirements, and wealthier borrowers have benefited the most: Even borrowers without high incomes are starting to qualify based on healthy savings and high credit scores alone. “They have a better chance, but not every lender is willing to do that,” Fratantoni says. “It might require some shopping around.”

But even as the housing market improves, loan originations overall are expected to drop by 10 percent this year versus last, according to the MBA. Banks remain reluctant to part with their own reserves, even though they are flush after five years of easy money from the Federal Reserve. Fratantoni says the change in credit availability reflects the banks’ more prudent lending and the elimination of “no-documention” and “interest-only” loans that led to many of the foreclosures in the real estate crash.

Also, bad loans of all shapes and sizes are still working their way through foreclosures and court proceedings. Just this week, prosecutors in New Jersey filed charges against one of television’s “Real Housewives of New Jersey,” Teresa Giudice, and her husband Giuseppe “Joe” Giudice, who were charged with falsifying income data on $2 million in home mortgages dating back to the early 2000s when standards were loose.

Financial regulators are also pushing for controls to avoid the excesses that led to the crash. The new Consumer Financial Protection Bureau has been pushing for a limit on borrowing when a debt-to-income ratio exceeds 43 percent, although Congressional opponents worry it will “reduce access to credit that qualified borrowers need to buy homes,” according to a press release issued by members of a House Financial Services subcommittee.

Lending experts say consumers need to be well-prepared to deal with the stringent process when they seek loans. Documentation is important, sometimes in the form of a letter from an employer. People seeking mortgages should also be prepared to shop for deals. Different lenders have much different standards. Down payments are rising for many loans, with 20 percent to 30 percent equity required from private lenders. For those who qualify for FHA loans, the down payment is 3.5 percent, but requirements for the federal lending program are stringent. Two years in a job and a credit score of 620 or better are needed, and costly mortgage insurance adds more than a percentage point to the lifetime cost of the loan. For wealthy buyers, FHA loans don’t help much since they are capped at $625,000.

The high-end lending market is slowly recovering, though, and private lenders are extending credit for the well-heeled while avoiding the starter-home set that can borrow through government programs. “It’s more work but things are getting done,” says Love, whose clients are mostly those with enough money to afford a second home. “We are very busy this summer, and we haven’t even gotten to the peak period [at summer’s end when people often buy vacation homes.]”

Biltmore’s Vernon says his firm has been busy getting loans for wealthy clients who borrow against their investment portfolios. The rate of borrowing in so-called margin accounts has reached near the all-time highs just before the 2008 market crash. That strategy is attractive because such arrangements offer rates as low as 1 percent and sometimes even less, and they require no additional down payment because the banks hold the securities that back up the loans. “It’s almost no risk to the banks because the securities are pledged as collateral,” Vernon says.

The downside is that if the securities fall in value, the borrower’s assets can be liquidated. Vernon says he advises caution and recommends such borrowers keep “back-up emergency funds” like a home equity credit line. The rates can also increase as overnight bank-lending benchmark rates rise.

MBA’s Fratantoni worries that a further increase in interest rates could cause problems for borrowers at all income levels. “People’s credit has been getting better since the crisis,” he says. “But any time you see a rapid increase in rates, anything tied to variable rates has some additional risk.” Bankers and consumer advocates find themselves in rare agreement on the issue. Easing loan terms too much could be risky for banks and borrowers.

NEW YORK (AP) — Disappointing results from PulteGroup, D.R. Horton and other home builders left major stock indexes with only tiny gains in afternoon trading. Technology stocks rose after Facebook’s earnings blew past analysts’ estimates.

Even with plenty of news from big companies, the broader market was mixed. Of the 10 industry groups in the Standard & Poor’s 500 index, five rose and five fell.

D.R. Horton, the country’s largest builder, and PulteGroup said orders for new houses jumped in the second quarter, but their results still fell short of what analysts had expected. PulteGroup also posted a 14 percent decline in profits

‘‘Housing is taking it on the chin,’’ said JJ Kinahan, chief derivatives strategist at TD Ameritrade. ‘‘I think what you’re seeing a bit of today is people questioning what higher mortgage rates mean for housing.’’

The Standard & Poor’s 500 index was up two points, or 0.1 percent, to 1,688 as of 2:30 p.m.

The Dow Jones industrial average rose two points, or 0.01 percent, at 15,543. The Dow was held back by Caterpillar, which warned of sagging sales on Wednesday.

The Nasdaq composite index rose 17 points, or 0.5 percent, to 3,596.

It’s nearly halfway through the second-quarter earnings season, and the overall trend looks good, but not great, said Tyler Vernon, chief investment officer of Biltmore Capital in Princeton, NJ. ‘‘There have been some big disappointments, like Caterpillar yesterday, but we’re seeing better and better numbers coming out.’’

Analysts forecast that companies in the S&P 500 index will report earnings growth of 4.3 percent over the same period last year, according to S&P Capital IQ. At the start of July, the forecast was for growth of 2.8 percent. More than six out of every 10 companies have cleared analysts’ earnings targets so far.

In the market for U.S. government bonds, the yield on the 10-year Treasury note climbed to 2.62 percent from 2.59 percent the day before. Late last week, it was trading at 2.48 percent.

The 10-year yield acts as a benchmark rate for most mortgage loans. A sharp increase in the rate drives up mortgage costs and could slow down sales in the housing market.

It’s still very low by historical standards thanks in large part to the Federal Reserve’s massive bond-buying program. The yield hit a recent low of 1.63 percent on May 3. By contrast, it was trading around 4 percent in the summer of 2008, shortly before the worst days of the financial crisis.

Among other stocks making big moves:

— Las Vegas Sands, a major casino operator, fell $1.25, or 2.3 percent, to $53.69 after it posted lower revenue and income than financial analysts had expected.

— Harley-Davidson rose 40 cents, or 1 percent, to $56.27 following news that the Milwaukee-based motorcycle maker’s earnings rose 10 percent in the second quarter, driven by an aggressive expansion abroad and revamped production.

— Visa rose $8.06, or 4 percent, to $194.78. Visa returned to profitability in its third fiscal quarter and reported strong revenue growth as the company processed more transactions worldwide.

The list recognizes the efforts and success of financial professionals across the state. The award is presented by New Jersey Monthly Magazine that engaged Five Star Professional, an independent research company, to perform research and rankings of Wealth Managers in New Jersey.

“It is a tremendous honor to be ranked as a Five Star Wealth Manager,” says Vernon. “My team and I strive to consistently deliver outstanding service and investment advice, and this award underscores our ongoing efforts.”

Mr. Vernon is president and Chief Investment Officer at Biltmore Capital Advisors. Mr. Vernon founded the Princeton, NJ-based firm after spending nearly a decade working on Wall Street. Biltmore Capital Advisors specializes in investment planning and management, with a particular focus on alternative investment strategies. Mr. Vernon is often featured by the national media, including on CNBC, Fox Business, Bloomberg, and in the Wall Street Journal.

Vernon was featured in the January 2013 issue of New Jersey Monthly Magazine. Vernon was also recognized on the 2011 list.

Award candidates were then evaluated against 10 objective eligibility and evaluation criteria associated with wealth managers who provide quality services to their clients such as client retention rates, client assets administered, firm review and a favorable regulatory and complaint history. Five Star Professional finalized the list of Five Star Wealth Managers to be no more than 7% of the wealth managers in the area.
• Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers.
• The Five Star award is not indicative of the wealth manager’s future performance.
• Wealth managers may or may not use discretion in their practice and therefore may not manage their client’s assets.
• The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine.
• Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future.
For more information on the Five Star award and the research/selection methodology, go to www.fivestarprofessional.com

CHICAGO (MarketWatch)—Tempting low interest rates continue to make headlines, making refinancing your mortgage look attractive. But when retirement isn’t far off, the decision to refinance can get more complicated.

After all, most pre-retirees are trying to reduce debt before their last day of work, not extend the amount of time they’ll be on the hook for payments.

Still, for some homeowners with retirement on their minds, it makes sense to trade their higher mortgage rate for one near record lows, said Keith Gumbinger, vice president of HSH.com, a publisher of mortgage and consumer loan information. The money saved each month on your mortgage can be poured into other investments that could pay off in retirement, “whether that’s a 401(k) or IRA or cleaning up other debts,” he said.

If you haven’t refinanced in the past few years, your monthly savings can be substantial. The 30-year fixed-rate mortgage averaged 3.34% for the week ending Dec. 6, while the 15-year fixed-rate mortgage averaged 2.67%, according to Freddie Mac’s weekly survey of conforming rates. For those with a current mortgage rate near 5%, refinancing could mean significant improvement to their monthly cash flow.

Consider this: A homeowner who’s 52 today and who wants to retire at 70 bought a home in 2002 with a $250,000 mortgage. He refinanced at 5% in 2003. If he refinanced again into a 3.49%, 30-year fixed-rate mortgage, his payment would go down $415 a month, according to Gumbinger’s math.

The downside is the loan wouldn’t be retired until he is 82, and it would cost $3,432 more in interest over its lifetime than if he didn’t refinance.

To make that kind of trade-off work for you, it’s critical to ensure the increased cash flow is used productively.

“You have to be determined to save the money and invest it in something that would yield a higher rate of return than the interest rate you’re paying,” said Rich Arzaga, founder of Cornerstone Wealth Management in San Ramon, Calif. Conservative vehicles including corporate or municipal bonds—held long term—are a good option, he said. Money market accounts and certificates of deposit probably won’t cut it right now, with the paltry returns they’re paying out.

For others, the monthly cash flow may not be worth the hassle or the cost of a refinance, especially if the homeowner is close to the end of the mortgage term. At that point, the bulk of the payment is going to principal, said Tyler Vernon, president of Biltmore Capital Advisors in Princeton, N.J.

“Banks do that because they know that most people don’t have a mortgage for more than six years, so basically they’re paid mostly interest up front,” he said. But by the time the homeowner has five to 10 years left on a mortgage, he or she is paying much less interest, he said.

It’s helpful to talk out your own personal scenario with a financial planner before deciding to pull the trigger. But here are a few factors to consider prior to making a decision.

Your personal time frames

When doing your calculations, it’s important to consider how long you’ll stay in the home and when you plan on retiring. Knowing your goals is essential in making this financial decision.

For instance, if your goal is simply to increase cash flow and owning your home free and clear isn’t a priority, perhaps refinancing makes sense. Some people plan on downsizing when they retire or trading in their home for something more suitable, Gumbinger said. If you’re one of those people, the idea of refinancing might not be as frightening—you’ll be paying off that mortgage anyway when you sell your home.

But the time you’re planning on staying in the home shouldn’t be too short, since you’ll want to be there long enough to recoup the closing costs on the refinancing.

That said, if you’re planning on remaining in the home for good, with a goal of paying it off, you’ll have to seriously think about how you’ll pay the mortgage when you’re no longer bringing home a paycheck. And you may have no interest in lengthening the mortgage term into retirement.

How old you are will also be a big factor. “If you’re closer to 65, that’s a different scenario than if you’re 55 or 52,” Gumbinger said.

Time left on the existing mortgage

Regardless of your personal time frame, if you have 10 years or more left on the existing mortgage, there’s a chance it may make sense to refinance. With more than a decade to go, you’re not yet applying as much payment to principal, said Bill Losey, president of Bill Losey Retirement Solutions, based in Wilton, N.Y.

For those with less than 10 years on the loan, it’s a different situation, since more of your mortgage payment goes toward principal.

Furthermore, while lenders might offer a refinance product with a 10-year term, it will be difficult finding a mortgage with a shorter term than that, Gumbinger said. And if you’re near retirement, it’s unlikely you want to add another 20 years to your mortgage through a 30-year fixed product.

Risk tolerance

In the end, only you can decide how much risk you’re comfortable with.

“I always say, you want to enter retirement completely debt free, with the only exception potentially being your mortgage,” Losey said. “No one should have a mortgage past 70 tops, even at these historic low rates.”

Others see some upside to extending your mortgage. With a mortgage paid off in retirement, you may have more control of your expenses but it could be more difficult to tap home equity if you need it. For instance, there’s no guarantee reverse mortgage products will be available at some future date, Gumbinger said.

And you may not want to go that route anyway. Investments such as bonds and stocks that refund dividends are more liquid than your home equity, which could be helpful when those on a fixed income need cash—whether the reason is unexpected or not.

Either way, take a pass on mortgage life insurance, Gumbinger said. That’s a policy that offers more protection to the lender, who will receive funds in the event of your untimely demise, he said. You’re better off considering a standard term life policy instead; that way, the beneficiary has the freedom to do what he or she wishes with the proceeds—including, if he or she wishes, paying down the mortgage.

The love fest of the political convention season ended almost as soon as it began, when the first prime-time speaker, House Speaker John Boehner, set a Republican agenda that “starts with throwing out the politician who doesn’t get it, and electing a new president who does.” Since then, the two parties have launched into a brawl in which few rules apply, and flame-throwing and facile lies are standard gear.

The loser could well be you and your stock portfolio over the next two months. Much of the heated rhetoric will consist of Republican claims that President Obama mishandled the economy or Democrats saying how they believe Mitt Romney’s programs would hurt people more.

In that kind of environment, investor confidence, already low, could sink further, say some analysts. Fund company T. Rowe Price said in its recently monthly report, “investors are focused on an apparently never-ending eurozone crisis and the campaign rhetoric emanating from both major political camps in the U.S.”

Good-time elections now history. Historically, election years have been good times for investors. But over the past five elections, the Dow has fallen an average of 3.72 percent, and declined in four out of five September-to-November election day periods.

“The past several presidential elections, and politics in general, just keep getting more nasty,” says Tyler Vernon, chief investment officer and co-founder of Biltmore Capital Advisors in Princeton, N.J. “It’s not the way things were 25 years ago. Over the past few cycles, it has become much more negative. With Democrats and Republicans, the attack ads are questioning leadership more and more. It hurts investor confidence.”

The perception that advertising is growing more negative is borne out by numerous studies. A recent one by the Wesleyan Media Project showed negative ads rising by a staggering amount—accounting for 70 percent of all presidential advertising in the early few months of this year, compared with just 9 percent in the 2008 period (although other factors, including fewer positive ads run by groups supporting Obama in this cycle, caused some of that shift.)

The big difference over the past four years is that so-called Super PACs have been freed from spending limits, or even listing contributors, and the Big Money advertising has been overwhelmingly negative, the Wesleyan study showed.

Politicians have always had a penchant for painting a negative picture of their opponents—some remember President Johnson’s vivid black-and-white television ad showing a girl picking a flower as a nuclear mushroom cloud appeared behind her, a slap against his opponent Barry Goldwater’s strident anti-Communism, or George H.W. Bush’s ads accusing Massachusetts governor Michael Dukakis of furloughing a convicted murderer, Willie Horton, who embarked on a violent crime spree.

Those negative campaigns, though memorable, were not the norm. The LBJ ad was quickly withdrawn. And ads were often about “finding prosperity,” rather than slamming the economy, Vernon says. From 1900 to 1988, the market scored nearly twice as many gains as losses in the September-through-November election span. The Dow gained in 15 of the years and declined in eight. The average September-to-election gain was 1.7 percent, exactly in line with the average gain for all two-month periods since 1900.

Impact of financial crisis. The most recent election losses can be blamed at last partly on the crash of 2008, which was an election year event, although election years of the past also had some ugly Octobers, including the 1932 pre-election period in which stocks plunged 20 percent.

But the rising importance of the economy as an election factor and a surge in negative advertising are also playing a critical role, studies show. It’s not just your imagination; things really have gotten uglier since the days of Ike and Adlai, or even since Bill Clinton and George Bush the First.

The Google Ngram tool, which measures and displays keywords in publications going back to 1800, shows a dramatic “hockey stick” upswing in the term “negative political advertising” after 1988. It also shows the steady rise of the phrase “the economy” in the national dialogue. Social issues and foreign policy have faded, in relative terms.

The issue-oriented negative ads might be even more effective at swaying voters than obvious personal attacks, suggested one study by two Rutgers professors and one from George Washington, “The Effects of Negative Campaigning, A Meta-Analytic Reassessment.” They saw significant potential for the practice to undermine public sentiment.

The focus on business issues likely reflects the fact that many of the Super PAC contributors are wealthy and tend to be most interested in issues affecting their financial standing. Supreme Court rulings in 1976 and 2010 affirmed a free-speech right to spend one’s money on political campaigns without limit, freeing wealthy contributors and candidates of key post-Watergate campaign reforms. Many politicians began shunning matching funds to give them more fund-raising freedom.

What investors are doing. “A lot of people are just incredibly confused about the economy, and they are like deer caught in the headlights,” says Vernon. “The campaign promises and attacks are not helping. There is always uncertainty about elections, but it is really magnified this time. The leadership, both Democrat and Republican, acts like they are in kindergarten when it comes to getting things done. They prefer to do things that are right for the party, not for the country,” citing the near shut-down of the federal government over the disagreement on extending the debt ceiling.

Still, the market responds to influences well beyond the scope of any election, and there’s no doubt it’s been surprisingly strong in the August through early September period with the S&P returning to prerecession highs. But economic indicators, like the latest ugly jobs report, are still weak. “It’s hard to get really excited about the market when all that really gets it going is the chance for easier Fed policy,” says Vernon.

He is advising his own clients “to stay long, but stay hedged.” He advises a balanced portfolio and a long-term view. Studies in the past have shown that the market does worst during the first two years of a presidential term, and tends to do better the second two years.

While stocks have performed poorly in recent pre-November periods, bonds have been generally stronger, gaining in price and offering steady yield.

“From now to the election, bonds will be a fairly good place to be,” Vernon says. “People do not want to invest in riskier things when there is a high level of uncertainty. And there is a lot of that out there now.”

Tyler Vernon watched both planes fly into the World Trade Center on 9/11, one from his office at Merrill Lynch, and one as he was fleeing Manhattan.

Like many New Yorkers, he thought about what would have happened if the plane had veered slightly to the left and into his building, and began reevaluating his own path. While already a Vice President, he felt he was “grinding” through his work day, and after 9/11 he began to plan for a change of life, and a change of venue. But first, he changed his marital status, quickly becoming engaged to Molly, who he had been dating since meeting at the Subway Series in 2000.

Like Molly, Tyler had grown up on a farm. His father was a veterinarian who owned a vineyard in Tewksbury, NJ. Tyler loved rural settings and dirt roads, as well as great restaurants, theaters and clubs. Molly’s love of Princeton and The Stuart Country Day School swayed him towards the Princeton area. Because his father had worked such long hours, Tyler was committed to headquartering Biltmore Capital Advisors in Princeton and avoiding the commute to New York City so he could spend more time with his family.

Tyler’s approach to business is straight forward: work hard, do what you say, and do it when you say you are going to do it. He believes many people “don’t do the follow through,” even on the simple common courtesy things. Tyler follows this approach, but his success may be due in part to something else — his ability to deliver more than is expected.

When Tyler recounts how he got his first position on Wall Street, it is clear he has the buckle down, outperform mentality that helped him launch a successful new business.

As a college student attending Lafayette College in Easton, Pennsylvania, he realized engineering was not the right career path for him despite the fact math and science came easily. He wanted something more people centric, and like many ambitious young students, cast his eyes towards Wall Street. He felt handicapped as his family did not have personal contacts to help get an initial interview. He applied for an unpaid internship, but the hiring manager didn’t respond to multiple emails and calls. That didn’t stop Tyler. He hopped a bus for the two hour trip to Manhattan, walked into the World Financial Center and announced he was there to see the hiring manager who had ignored him. Not surprisingly, the manager was impressed and Tyler got the internship.

Perhaps equally telling, once he had secured the internship, Tyler did not let up. He made sure he was the first intern to arrive in the morning, awakening at 4:30 am every Friday during the school year, taking the bus two hours in and two hours back. During summers he continued with unpaid internships while working at restaurants at night and weekends to pay for his walk-in-closet sized apartment in Queens. ”I was pretty much working 24/7. But I knew that’s what I had to do. I had to create my own path,” he says with a shrug.

Tyler continues to buckle down and outperform. “Everyone calls themselves ‘Financial Advisors,’ including CPA’s and insurance brokers. We are looking for ways to set ourselves apart from the competition, thinking about what we can to do make clients lives easier, better, more confident in their investment and retirement plan,” he explains.

“The stock market has done nothing in ten years. We want to give people a new direction, a new way of living in retirement. Not the same old thinking about investing in stocks, but strategies to approach other markets,” he explains, adding with a smile, “Our approach is catching on quickly.”

Indeed. Biltmore Capital Advisors signed on its first clients in early 2008, right before the meltdown leading to the Great Recession. At a time when many financial firms were imploding, Biltmore Capital Advisors has been “catching on” — doubling its revenue in 2010 and growing 30% over each of the last two years, expanding to 15 employees, and opening offices in Dallas and Atlanta. In fact, most of its high net worth individual and institutional clients live outside of the Princeton area, something Tyler would like to change long term so he and his employees can stay off airplanes and closer to home.

To that end, Biltmore Capital Advisors has started to focus its marketing efforts in the tri-state area, and reaching out to make more local connections. Tyler has introduced clients from around the country to several local businesses, such as banks, mortgage companies and insurance firms. He is also holding events to showcase Biltmore Capital Advisors to local investors. The last one, held at the Nassau Club, was so popular invitees had to be turned away.

Tyler has grown to love Princeton, making good friends and reveling in the cooperative spirit among businesses here. In fact, Tyler believes personal relationships in Princeton helped his firm survive and thrive. As Biltmore Capital Advisors was launching in 2008, Tyler gave a presentation where he predicted the investment market was about to become “frothy” and advised investors to move towards cash. News of Tyler’s investing wisdom created buzz on Wall Street and newsmakers from Fox Business News and CNBC quickly asked him to share his investing insights with their international audiences. Tyler became a regular commentator on both business news networks, and Biltmore Capital Advisors‘ name recognition soared.

Not surprisingly, when asked to reflect on his own success and to provide advice for others, Tyler’s answer sounds a lot like Molly’s, “Find a passion, run with it, and it will all work out in the end.”

A 5% spike in shares of Bank of America (BAC, Fortune 500) led the Dow higher. The Charlotte, N.C., bank posted fourth-quarter net income of $2 billion, reversing a year-earlier loss, and revenue that topped expectations

Morgan Stanley (MS, Fortune 500) posted a loss, but it wasn’t as deep as analysts had expected, and shares of the bank surged almost 6%.

“The positive bank results were really unexpected,” said Tyler Vernon, chief investment officer at Bilmore Capital. “The past six months have been a terrible environment for banks, but it looks like things are getting better, which is generally better for the economy, too.”

Meanwhile, the government released an onslaught of economic data, including reports on housing, unemployment claims and inflation. Investorswere encouraged as initial jobless claims fell to their lowest level in nearly four years, in another sign of improvement in the long-suffering labor market.

However, concerns that the sharp drop may be one-time blip rather than a start of a new trend kept a lid on gains, said Vernon.

“Traders are concerned about seasonality factors, and worried that claims could return to the status quo over the next coupe of weeks, so they’ll wait to see what happens,” he said.

Investors remain focused on Europe’s crisis this week. Early Thursday, Spanish and French bond auctions drew solid demand, calming some fears about Europe’s ability to fund its debt.

Greek officials will continue talks with the group representing private-sector investors and banks Thursday in an attempt to reach an agreement on the size of the writedown these creditors will take. No accord has yet been announced, but the creditors’ representative says one may come in the days ahead.

Economy: The government released December data on inflation, building permits and housing starts, as well as its latest tally of weekly jobless claims.

The Labor Department reported that 352,000 people filed for initial unemployment benefits last week, down sharply from a revised reading of 402,000 claims in the previous week. It is also the fewest number of people filing for jobless claims since the week ending April 19, 2008.

Consumer prices held steady last month, largely due to declining gas prices. The government’s key measure of inflation, the Consumer Price Index, showed prices were virtually unchanged from November to December.

The index for items minus food and energy rose 0.1% in December, after rising 0.2% in November.

Housing starts fell 4.1% in December, to an annual rate of 657,000 units. Building permits slipped 0.1% to an annual rate of 679,000.

The Philadelphia Fed Index showed that manufacturing activity continued to improve in January in the mid-Atlantic area, rising to 7.3 from 6.8 in December.

Companies: Bank stocks gained traction in early trading, with shares of Goldman Sachs (GS, Fortune 500) rising more than 2%, a day after the firm reported earnings that beat estimates.

Google is expected to post robust earnings of $10.49 a share, up from $8.75 a year earlier. Microsoft’s earnings are expected to remain essentially flat compared to the prior year, at 76 cents a share. IBM’s earnings per share are projected to climb from $4.18 a year earlier to $4.62.

Currencies and commodities: The dollar fell against the euro and British pound, but edged higher against the Japanese yen.

Oil for February delivery added 41 cents to $101 a barrel.

Gold futures for February delivery ticked down $3.90 $1,656 an ounce, losing momentum from earlier gains.

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 1.98% from 1.90% late Wednesday.

Taking charge of one’s financial situation ranks right up there with getting in shape as one of the top new year’s resolutions.

Tyler Vernon’s goal is to give his clients the best financial advice he can and give them the peace of mind that comes with knowing they have the time and money to enjoy their families and the good things in life.

Vernon is the founder and chief investment officer at Biltmore Capital Advisors, located on Witherspoon Street in Princeton. Previously, he was a financial advisor at Merrill Lynch for almost a decade and was a vice-president in the private client group.

Just a little over 10 years ago, on 9/11, he was sitting in his office at Merrill Lynch on the 40th floor of the World Financial Center, when he saw the first plane go into the World Trade Center. Because he saw the impact firsthand, he knew immediately just how bad it was. He grabbed his cell phone and wallet, yelled at people to get away from the window, and then ran outside. He made it onto the last ferry from the World Financial Center to Hoboken before the second plane hit.

Merrill Lynch relocated Vernon to the office in Livingston in Morris County, but about a year later, reopened its financial district location. It was hard returning after 9/11, but there was more to Vernon’s dissatisfaction with working in the Wall Street milieu.

“I was starting to see some of the things now evident in hindsight and many of the large firms imploded for various reasons,” he said. “I saw the conflicts of interest and how sometimes what was right for the client wasn’t what was right for the firm. I decided that if you always put client interest first, it would be a much better platform and revenues would follow.”

In 2007 after years of thinking about it, he and his wife, Molly, decided to move out of New York City. Compounding their desire to leave the city was the birth of their first child.

“Molly and I both grew up on farms and we both knew we did not want to raise our own children in a big city,” Vernon said. “Having grown up in Princeton, Molly still had a lot of connections here and we decided it was the perfect place to raise our family.”

It was also the perfect place for them both to pursue their entrepreneurial dreams. His wife owns Luxaby Baby and Child, a clothing store in Palmer Square, and he set up shop with his own independent financial services firm.

“Because we are independent, we can shop around and find the best products from all different firms and decide what best suits our clients needs,” Vernon said. “We saw the value of what we were building with an independent structure and environment.”

“We understand that money is valuable but time with family is also precious and limited, which is why we try to make our clients’ lives more simple with something we call the Biltmore concierge,” Vernon said. “For example, you can call and have a gift wrapped and mailed out or let us know that your car needs to be serviced and we can do that.”

Vernon believes in having a close relationship with his clients and to have meaningful conversations to understand their real goals.

“What are you trying to achieve? What do you really need in retirement? What is going to let you sleep at night? These are the kinds of questions that help us understand what our clients’ needs are,” Vernon said. “Maybe our client is awake at 2 a.m. because of worries about an elderly mother. For some people, it’s the ability to help other family members; for others it’s the ability to live a certain type of lifestyle. Ninety percent of clients will tell me that family time is one of the best investments you can make.”

Vernon’s own life reflects that same sense of priority, and one of the things he loves about his job is that it’s close enough to home that he can take his two daughters to school every day at Stuart Country Day School of the Sacred Heart.

“We love to sing and we love the Beatles, so we blast Yellow Submarine on the way to school,” he said. “I know how long it takes to get to school by how many times we play Yellow Submarine and that’s three and half times.”

His wife, who also went to Stuart, is on the school’s board and Vernon serves on the board of Trinity Counseling Service in Princeton.

Although Biltmore Capital serves a national clientele and also has offices in Atlanta and Dallas, Vernon loves the idea of being the hometown financial advisor for Princeton and he’s thrilled that Biltmore Capital is growing locally.

“Clients who know we are here stop by and we have people who have been
referring some of their friends,” he said. “The best reputations spread by word of mouth and we want people to know we are here and looking out for them.”

It helps that Vernon has been a spokesman in the financial services industry and his firm has received media coverage on CNBC, the Wall Street Journal and the Fox Business Report, among others. He is often tapped to serve as a guest analyst on the business news broadcasts, especially when there is breaking news in the financial sector.

But Vernon’s main priority is his firm’s clients and managing and growing their assets even in these tough economic times.

“Our big value-add is to take dependence on the stock market out of the equation, given the high level of volatility there over the last few years,” he explained.

Vernon believes that with the roller coaster economy, many people are in positions where they need to take a good look at their money and put their financial house in order no matter how painful that may be.

“A lot of people have been nervous about opening their statements because they are so worried about what has been going on with the wildly fluctuating markets,” he said.

“People who were laid off may have their 401ks floating around, without a proper strategy for rolling them over and maximizing their opportunities,” he said. “So our job is to say ‘let’s get eyes on this’ and ask is there anything you should be doing differently. And January is a great month to do that. Our goal is for our clients to leave here saying, ‘their service was impeccable, they really do have a different approach to handling assets; nobody else is like that.’”

NEW YORK (TheStreet) — The Dow Jones Industrial Average shot into positive territory Wednesday as commentary from the Federal Reserve on plans to shore up the U.S. housing market overshadowed European debt crisis concerns.

The Dow rose 21 points, or 0.2%, to close at 12,418, after falling 0.5% earlier in the day. The S&P 500 climbed less than a point to 1,277, while the Nasdaq slid less than a point to 2,648.

The turn higher came after the central bank sent a white paper to Congress calling for the federal government to take more action to stabilize the still-floundering U.S. housing market. The paper suggests “redeploying foreclosed homes as rental properties” as a possibility for combating an expected flood of foreclosures hitting the market and prompting another pricing swoon.

“Continued weakness in the housing market poses a significant barrier to a more vigorous economic recovery,” the paper said. In a letter to lawmakers on the Senate Banking and House Financial Services committees, Fed chairman Ben Bernanke wrote, “Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery.”

Concerns about Europe’s sovereign debt crisis resurfaced Wednesday with early declines underlined by fresh worries that the situation in Spain is worsening. The Iberian country is considering applying for loans from the eurozone bailout fund and the International Monetary Fund to help the restructuring of its banking industry, the Spanish newspaper Expansion reported, citing anonymous sources.

Also, overnight deposits of commercial lenders hit a record high at the European Central Bank, suggesting that Europe’s banks remain incredibly cautious about lending to each other. Shares of UniCredit, Italy’s largest bank, sank 14.5% after the lender said it will sell $9.8 billion worth of new shares to boost capital.

Investors are also sensitive to rising borrowing costs in the eurozone with a France holding a bond auction on Thursday, and Italy and Spain about to sell debt next week.

Germany’s DAX lost 0.89% while London’s FTSE was down 0.55%. Overnight, Japan’s Nikkei Average settled 1.24% higher, and Hong Kong’s Hang Seng was down 0.8%.

“We are holding very neutral until we get some better volume trading and a better sense of what investors are going to do,” said David Ader, rates strategist at CRT Capital Group. “On the surface we have mixed to bearish technicals, better data and some degree of calm in Europe.”

The U.S., however, received another piece of positive economic data. The Commerce Department reported that U.S. factory orders rose 1.8% in November after a 0.4% fall in October, slightly beating the 1.7% forecast of economists polled by Thomson Reuters. Meanwhile, General Motors(GM_), Ford Motor(F_) and Chrysler Group beat analysts’ estimates for December car sales, with sales getting a boost from increasing consumer confidence and ads around the holiday season.

GM said that its December sales rose 5%, led by a 9% gain at Chevrolet. For the full year, GM sales rose 14%, to more than 2.5 million vehicles, and GM gained market share. Ford said that its car sales rose 10% last month and 11% for the year. Meanwhile, Chrysler’s sales jumped 37% in December. GM traded 0.5% higher while shares of Ford rose 1.5% on Wednesday.

In other corporate news, Yahoo!(YHOO_) tapped PayPal President Scott Thompson, who runs eBay’s (EBAY_) online payments unit. Yahoo! had been without a permanent CEO since firing Carol Bartz in September. Shares fell 3.1% to $15.78.

A big mover in afternoon trades was Eastman Kodak(EK_) following a report that the 132-year old company is preparing to file for bankruptcy in the “coming weeks if it fails to sell its patents. The report from The Wall Street Journal, which cited anonymous sources, comes after months of speculation that the company was preparing to take this step. Kodak shares tumbled 28% to 47 cents.

Jefferies Group’s(JEF_) executives and other employees at the company’s prime-brokerage unit threatened to leave the firm in a dispute over issues including a recent restructuring and year-end compensation, The Wall Street Journal reported, citing people familiar with the matter.

Jefferies executives and its global head of prime brokerage, Glen Dailey, reportedly held meetings Tuesday to discuss the issues but Dailey said that no one was leaving, adding that the “family affairs are now in order.” Jefferies in recent weeks has seen its stock under attack over its European exposure. Shares slipped 2.6% to $13.64.

Acme Packet(APKT_), a networking-equipment maker, lowered its outlook for the fourth quarter. The company, whose products include both hardware and software, now sees non-GAAP earnings of 26 cents to 28 cents a share for the three months ended Dec. 31 on revenue ranging from $84 million to $86 million. The current average estimate of analysts polled by Thomson Reuters is for a profit of 37 cents a share in the quarter on revenue of $93.4 million. Shares plunged 19% to $25.70.

With most of the day’s trading in negative territory stocks barely hung on to Tuesday’s strong New Year’s rally, which saw the S&P 500 index finish at its highest level since late October. The Dow, up 1.5%, closed at its highest since July 2011.

Analysts think that the S&P 500 will gain 6.6% by the year’s end, compared with a flat finish for 2011, according to polls by Reuters. Investors are now looking carefully at how stocks perform the first days into the new year, as track records show that positive momentum in January often translates into a bullish year overall.

“Transports and technology stocks could help the market in the beginning of the year,” noted Tim Ralph, portfolio manager at Biltmore Capital Advisors. Both sectors benefited from online shopping in the holiday, explained Ralph. “We could see strength here later this month and in early February.”

February oil futures settled up 26 cents to $103.25 a barrel, while February gold futures gained $12.20 at $1611.90.

The dollar index was up 0.5%. The benchmark 10-year Treasury was down 12/32, pushing the yield to 1.991%.

NEW YORK (CNNMoney) — U.S. stocks pared earlier gains Tuesday following reports that German Chancellor Angela Merkel rejected the idea of increasing Europe’s bailout fund.

At midday, the Dow Jones industrial average (INDU) was up just 59 points, or 0.5%, and the S&P 500 (SPX) gained 5 points, or 0.4%. The Nasdaq briefly drifted into the red, but recovered to rise 2 points, or 0.1%. All the major indexes started the day about 1% higher.

The pullback came after a Dow Jones report said that Merkel has rejected suggestions to raise the funding limit for the European Stability Mechanism, or ESM, which currently stands at €500 billion. The fund goes into effect next year and may run alongside the €440 billion European Financial Stability Facility.

U.S. stocks started the day with solid gains thanks to an initial void of bad news out of Europe. Though political leaders have been taking steps toward a resolution for the region’s debt problems, the details have yet to be worked out.

“All eyes are still on Europe,” said Tim Ralph, portfolio manager at Biltmore Capital. Official meetings and statements will be minimal as the year come’s to a close, but Ralph said that the market remains vulnerable to headline risks.

Investors are on watch for possible downgrades on European country credit ratings from Standard and Poor’s, which warned last week that it may strip some of Europe’s biggest economies, like Germany and France, of their AAA-rating.

Investors are also waiting to hear what the Federal Reserve will say at the end of its policy-making meeting.

Intel warned that it will badly miss its sales forecast for the current quarter on Monday, because of the worldwide hard drive shortage caused by massive floods in Thailand. Shares of Intel (INTC, Fortune 500) dropped nearly 4% in trading Monday, and continued to slip on Tuesday.

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